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Homework answers / question archive / Seven years ago, Mr
Seven years ago, Mr. & Mrs. Birches took out a 30-year loan to buy a $975,000 home at 6% APR and monthly payments. They borrowed the full amount of the house (no down payment). How much do they owe now?
Computation of Present Value using PV Function in Excel:
=-pv(rate,nper,pmt,fv)
Here,
PV = Present Value = ?
Rate = 6%/12 = 0.5% compounded monthly
Nper = (30-7) years*12 months = 23 years*12 months = 276 months
PMT = 0
FV = $975,000
Substituting the values in formula:
=-pv(0.5%,276,0,975000)
PV or Present Value = $246,133.98
